While you are still waiting for the Hong Kong stock market to rebound, the US stock Tilray rose more than 16 times in the two months after listing, helping many people realize their dream of marrying Bai Fumei. How are you? are you all right?
No matter demon stock or god stock, these two days marijuana stock Tilray has captured the attention of investors in the entire US stock market. On the 19th, the trading volume reached US $7.1 billion, and the turnover rate was as high as 34%. The market capitalization of US stocks, No.1 Apple Inc, had a trading volume of US $5.9 billion on the same day, and the intraday amplitude was as high as 96%. The circuit breaker mechanism was triggered five times. On the US social investment sharing website, search for the hottest stock of the day.
No. 1 on the hot search list (source: StockTwits)
On the 19th, the closing market value was close to 20 billion US dollars, more than double the market value of the industry giant Canopy on the same day.Marijuana stocks with the largest market capitalization in the United States。
Since August this year, the whole hemp stock sector has come out of a wave of soaring prices, especially Tilray, whose amazing performance has attracted a large number of investors to this particular industry. After more than a month of surge, people can't help but wonder whether this is a big explosion of industry potential, or is the charm of the bubble too attractive?
It has soared more than 16 times in two months, making the short sellers tremble collectively.
On the 19th, the intraday high reached a new high of US $300, an increase of more than 90% at one point, more than 16 times higher than the peak offering price on July 17. Although the previous day's shock trend continued on the 20th, it opened 10% higher, and then closed down nearly 18%. Its K-line is still the dream of new investors in Hong Kong stocks.
Tilray daily K line (source: Futu Securities)
The latest data released by financial technology and analysis company S3 Partners on Monday show thatInvestors who shorted marijuana stocks since the beginning of August have lost $626 million.Despite the sharp rise in marijuana stocks and the high cost of shorting, the enthusiasm of the short sellers continues unabated. Total short selling of marijuana-related stocks has risen 44% since the end of the second quarter, and short positions in a total of 33 stocks have climbed to $1.5 billion, mainly against Canopy and Tilray.
What must be mentioned in this army of short sellers is the big short citron.Citron first issued a report on long Tilray on August 15th.Bullish its target price to $45, which is alsoThe tipping point of the whole marijuana market.. Unexpectedly, at that time, the Tilray of more than 20 US dollars soared all the way under a series of advantages, and successively broke through the $50,100,200,300 mark in more than a month. When Citron, which was first promoted, began to express concern about the soaring Tilray on Sept. 4, it is now starting to short Tilray.
(source: Citron Twitter)
Tilray closed at $77 on Sept. 4.Citron launched again yesterday (September 19)Said that Tilray's performance was beyond understanding, reflecting the strong volatility of low-float equity. We are still shorting and will keep our positions under control until the market comes to its senses.
(source: Citron Twitter)
According to MarketWatch dataAs of august 31, the position of shorting Tilray had increased to 3.5 million shares, accounting for nearly 20 per cent of its outstanding share capital.
Tilray latest market information (source: MarketWatch)
Tilray currently has a total share capital of 76.48 million and a current share capital of 17.81 million, but recently the average daily turnover has reached more than 10 million, which meansThe turnover rate of tradable share capital is about twice as high.In particular, the turnover on the 19th even exceeded that of Apple Inc. With low circulating equity, high turnover rate and increasing short positions, market participants generally believe that the recent rise in stock prices is the result of short selling.
Short-selling means that when investors think that the stock price is going to fall and the proportion of short positions in the market is high, investors compete to sell, and short positions can be forced to buy and close positions without tickets, leading to a further rise in stock prices.
CEO Kennedy said in an interview with Bloomberg that Tilray will become a company with a market capitalization of hundreds of billions of dollars in the future. It is reported that the lock-up period for insiders will expire in January 2019, and it is not known whether Kennedy will hold on to it at that time.
Behind the skyrocketing: the explosion of suppressed demand and the accelerated layout of capital
Is the explosion of marijuana fuelled by the great potential of this mysterious industry, or is it fuelled by the human power of greed? Before we think about it, let's take a look at the magic of marijuana.
Many Chinese people regard marijuana simply as a drug, mainly because they do not understand the ingredients of marijuana. There are two main chemical constituents in cannabis plant: 1) THC (Tetrahydrocannabinol), which is the main psychoactive component of tetrahydrocannabinol, hemp; 2) CBD (Cannabidiol), which is cannabis diol, a kind of cannabis diolImportant cannabinoids with therapeutic efficacy。
One of the important reasons why marijuana is banned in many countries and regions is that THC can affect the mood of users and may lead to addiction, which is what we call "drugs". ButThe efficacy of CBD has attracted more than 30 regions and countries to legalize medicinal marijuana.. On Sept. 17, Coca-Cola Company said that he was considering paying close attention to the inactive ingredient CBD, and the possibility of using it as an ingredient in functional health drinks was attracted by CBD.
Coca-Cola Company statement (Source: official website)
Many countries are gradually allowing the legalization of marijuana consumption, but in many countries it is still a law that forbids it. But when the benefits of rational use of marijuana are gradually recognized, especiallyThe US Drug Enforcement Administration (DEA) approved Tilray to introduce a medical cannabinoid research drug to the United States for medical research.After that, we studied the efficacy, safety and tolerance of marijuana on nervous system diseases. The news convinced the market that after waiting for government support, the "pent-up" demand in the pharmaceutical sector could see explosive growth.
Tilray's CEO Brendan Kennedy9 said in an interview with CNBC on March 18 that the future of pharmaceutical and alcohol companies working with marijuana manufacturers is a major trend and a global opportunity. When asked if he was interested in working with Anheuser-Busch Inbev SA Beer Group, he replied:
We don't want to work with Anheuser-Busch Inbev SA, what we need to do is to build such a company and build an industry leader in this $150 billion market.
There is no doubt that he has painted a bigger blueprint for investors.
Pharmaceuticals and consumption are two necessary and huge worldwide markets. Coca-Cola Company's impulse to try, Constellation brand wine industry injected 4 billion US dollars into CanopyAnother Citron is bearish on marijuana stock Cronos.Recently launched cooperation with biotech company Ginkgo and so on. Capital has already begun to enter the market to stir up the storm.
According to a report by Arcview, a market research company, global legal marijuana sales were $9.5 billion in 2017 and are expected to grow by 230 per cent to $32 billion by 2020, of which about $23.4 billion will be contributed by the US market, accounting for 73 per cent.
Figures from consulting firm Grand View Research are more optimistic, predicting that the global legal marijuana market is expected to reach about $150 billion by 2025, excluding black market sales.
In addition, Germany legally used medicinal marijuana in 2017, and its market is expected to expand from 9 million in 2017 to 1.6 billion US dollars in 2022. As a result, Germany has become the fastest-growing country in the global marijuana market and the largest market outside North America. Tilray has a partnership with Noweda, Germany's largest drugstore.
Canada officially legalized marijuana consumption on October 17 this year. Canadian marijuana sales are expected to grow from US $600m in 2017 to US $5.4 billion in 2022, with a compound annual growth rate of more than 55 per cent.
On September 18, the Supreme Court of South Africa passed a bill to legalize the private use of marijuana, making the country the third country in Africa to pass a similar bill. Zimbabwe approved the use of marijuana for medical purposes in April this year, but recreational uses are still illegal. Last year, Lesotho became the first country in Africa to issue a license to produce marijuana for medical and scientific use.
The Dutch government is planning to conduct trials of legal marijuana production in a few cities.
ButThe United States is the most important position, and the attitude of the United States Government is crucial.
At present, nine states in the United States have legalized marijuana for medical and recreational use, but federal law is still clinging to it. On Sept. 13, U.S. Customs and Border Protection officials said that the United States border will continue to crack down on marijuana, banning any Canadian marijuana industry workers and investors from entering the United States, and if they lie to conceal the truth, will face the risk of being banned from entering the country for life.
We have also seen recent reports of a crackdown on border marijuana smuggling on the website of the United States Customs and Border Protection Agency.
(source: U.S. Customs and Border Protection News)
In particular, US Justice Secretary Sessions strongly opposes and suppresses the legalization of marijuana. But recently Trump has been dissatisfied with his old friend, saying, "I don't have an attorney general." I am not satisfied with the border, I am not satisfied with a lot of things, not just this. As to whether Trump is a personal vendetta or whether he really intends to change to a competent leader, time will tell.
Trump himself expressed a positive attitude towards legalizing marijuana as early as June.
The Washington Post reported in June (source: screenshot of the official website)
And the American people are also increasingly enthusiastic about legalizing marijuana. A recent survey by the American Progress Center, a non-profit organization, found that 68% of Americans support the legalization of marijuana, a record high, and 40% of respondents strongly support the legalization of marijuana.
The myth created in 2 months is not only a miracle, but also the greed of human nature.
The stories of soaring stock prices are all about growth. Growth is not only related to the endogenous growth of enterprises, but also closely related to the external environment, especially policies. The story of Tilray, the nouveau riche, is the best example.
As we have mentioned above, the huge demand in the global market is in urgent need of filling, and in terms of policy, many countries are gradually taking the legalization of marijuana into consideration. In the future, as the industry gradually matures, the head industry will benefit from it.
Tilray,Canopy and Cronos (source: Futu Securities)
Tilray,Canopy and Cronos are three popular marijuana growers in the United States. The revenues of the three companies in the last fiscal year totaled $83.87 million, less than $100m. From the data in the chart above, we know that legal marijuana spending in the United States alone reached $8.5 billion in 2017 and will reach $23.4 billion in 2022, with an annual compound growth rate of 22.45%.
Generally speaking, if the industry develops into a stable period, it is generally the head company that occupies most of the market share. For example, in the mature global smartphone market, the five giants accounted for 71.3% of the market share in the first quarter of this year. From this point of view, the current marijuana market is still in an early stage, and companies that can get more resources and cooperation opportunities are likely to stay in the next wave of legalization.
What are the fundamentals of Tilray, and is the logic of the stock price rally still healthy?
At the end of August, Tilray reported its first earnings since going public. The company's second-quarter net loss quadrupled from a year earlier, mainly due to a sharp increase in equity incentives and listing expenses, with a loss of 17 cents per share. But revenue performance was much better than expected, with revenue nearly doubling year-on-year and quarterly sales nearly doubling from the same period last year. Gross profit margin 43%, R & D expenses $640000.
By contrast, the industry leader Canopy's second-quarter net loss increased 17-fold compared with the same period last year, mainly due to increased expenses due to listing, with a loss per share of US $0.30, revenue up 63% year-on-year and a gross profit margin of 43%. Research and development costs are about US $590000 (excluding fluctuations in the exchange rate of the Canadian dollar against the US dollar).
Judging from the first financial report, Tilray has a strong growth momentum, andThe cost control ability is strong, and the R & D investment is very strong.. Previously, Citron pointed out that Tilray has a leading international layout, products are exported to 10 countries, a number of clinical trials are being carried out one after another, and cooperate with the world's best pharmaceutical companies, which is one of the reasons why many investors are flocking to it.
Attach great importance to research and development, reflecting the foresight of its management, marijuana planting threshold is not high, and even many people can grow in private, how efficient, valuable and legal use of marijuana, which is inseparable from the support of high technology. However, Canopy still has a significant advantage in terms of patents. Canopy has applied for 39 patents in the United States, and Tilray currently has 22 patents that have been issued or are pending.
CEO Brendan Kennedy of TilrayMBA, from the School of Management of Yale University, has rich experience not only in venture capital, but also in the marijuana industry. You can see it in LinkedIn's personal file, at leastHave been involved in the marijuana industry since 2012.. Before joining the Tilray subsidiary in 2013, he held senior positions at Privateer Holdings, a leading private equity firm focused on investing in marijuana, and Leafly, the world's largest marijuana review site. (Privateer is the venture fund that founded Tilray. Kennedy, a former CEO, is now executive chairman and owns 93% of the voting rights of Tilray.)
Due to the positive factors of the external environment (that is, demand + policy) and the recent outbreak of a series of cooperation news, Tilray has gradually put on the cloak of "science and technology" and "medicine", and the capital market has given it a very high valuation.At present, the PS value of Tilray is more than 500x, Canopy is nearly 150x, and Cronos is more than 400x.
Seeing this, we may need to think about why the air force hit the south wall and did not look back. No one in the capital market is a fool willing to be slaughtered. There must be something wrong.
Despite the huge market demand in the future, the regulatory sword is still hanging over its head, and it is still unknown when it will be decided. With such a high valuation now, there will be a stampede if the performance does not live up to expectations in the future. after all, we have seen too many examples of Wall Street not paying even though historical transcripts are still excellent.
More significantly, last week, the Securities and Exchange Commission (SEC) made a rare sound to remind investors of marijuana investment and the risk of market manipulation and fraud.
SEC official statement (source: screenshot of the official website)
Although there is no clear direction, SEC specifically mentioned the need to pay attention to the risk of small-cap stocks because of the lack of information and low liquidity. The marijuana industry itself is far away from retail investors, and most marijuana stocks are listed in Canada, only this year began to gradually shift from the U. S. over-the-counter market to the U. S. stock public market.But despite the announcement on September 5th, it did not stop the subsequent frenzied rise, the power of the masses and the magic of human greed to be underestimated.
Summary
There is no denying that the market for medicinal and recreational marijuana is a vast blue ocean, especially as Canadian policy is about to land in October, and capital has begun to accelerate its entry to explore new development opportunities. The surge triggered by Citron since it was first bullish on Tilray in mid-August has reasonable logic.
But there is a piece of news worth thinking about. California's recreational marijuana was legalized in January, but sales growth is expected to be much slower than expected, in large part because the black market in marijuana has depressed market prices. In the long run, mainstream Canadian marijuana producers will not set up local operations centers in the United States until full legalization of federal laws, meaning market expansion will also be limited. One possible concern is that after Canada is fully legalized, the problem of oversupply will easily break out if companies expand production without support from the US market.
And now in terms of Tilray valuations and cash on the books, short-term risks can't be ignored. As of June 30, 2018, Tilray had cash on its books of $25.33 million, Cronos contracts of $69.36 million and Canopy contracts of $510 million. From this point of view, the Tilray capital situation is relatively inferior, according to the losses in the last quarter, if we cannot raise more funds in time and improve operating efficiency, the cash on the account may only be able to support 2-3 quarters.
The gloom of regulatory policy cannot be dissipated, the huge potential market cannot be cashed into revenue overnight, and how to make a profit effectively in the future is still a question. Cannabis stocks with hundreds of times valuation above their heads have to be reasonable in price, otherwise the higher they rise, the heavier they may fall, and it is best to wait for a rational return.
(Wen / Wu Dongxia / tr. by Phil Newell)